REG - Bank of Cyprus Hldgs - Announcement for the Investor Update Event

Bank of Cyprus HoldingsAnnouncement

08/06/2023 09:00

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RNS Number : 0984C  Bank of Cyprus Holdings PLC  08 June 2023

Announcement

Announcement for the Investor Update Event

Nicosia, 8 June 2023

Bank of Cyprus Holdings Public Limited Company ("BOCH" or the "Company" and
together with its subsidiaries the "Group") announces that during the Investor
Update event in London on Thursday 8 June 2023, it will present and discuss an
update of BOCH's outlook.

 

BOCH has revised its 2023 and 2024 financial targets and raised its ROTE(1)
guidance to over 17% and over 14% respectively, from over 13% per annum (as
previously announced on 20 February 2023). The key driver of the upgrade is
the revised expectation for net interest income, primarily to reflect higher
for longer rates.

 

Factoring in the current expectations for the evolution of interest rates
(with the ECB deposit facility rate averaging 3% for 2023 and 3.1% for 2024),
the net interest income guidance is upgraded and is now expected to exceed
€650 mn for 2023 and to fall modestly to over €625 mn for 2024. For 2025
net interest income is expected to be lower than 2024 reflecting a lower
projected ECB deposit facility rate of 2.5%. These net interest income targets
incorporate assumptions of:

·    modest loan growth of c.4% per annum for 2022-2025 in line with
expected economic growth;

·    careful growth of the fixed income portfolio;

·    gradual increase in time and notice deposit pass-through to c.50% by
June 2024 (previously expected by December 2023);

·    a gradual change in deposit mix towards time and notice deposits to
c.50% by December 2024 (previously expected by December 2023) and;

·    higher wholesale funding costs.

 

Simultaneously the Group aims to grow further its capital-light non-interest
income activities as well as improve the Group's operating efficiency and
invest in the business. The cost to income ratio(2) is now expected to fall
below 40% for 2023 and then to increase modestly to c.40% for 2024.

 

The cost of risk target of 50-80 bps for 2023 remains unchanged to weather the
ongoing macroeconomic and geopolitical uncertainties and then to normalise at
around 40-50 bps over the medium-term, whilst maintaining prudent underwriting
standards and meticulous assessment of customers' payment capabilities at all
times. Currently, there are no signs of asset quality deterioration.

 

For 2025, BOCH expects to generate a ROTE(1) of over 13% which is equivalent
to over 16% based on a 15% CET1 ratio, reflecting lower interest rate
assumptions. The NPE ratio is expected to drop further to below 3%.

 

These returns are expected to increase the Group's equity base, corresponding
to a strong organic capital generation of between 200 and 250 bps per annum
for 2023-2025, facilitating strong capital ratios and healthy capital buffers.
By 31 December 2025, the Group expects its CET1 ratio to stand at c.19%, after
deducting expected dividends per its dividend distribution policy(3).

 

The Company's aim to provide sustainable shareholder returns is reiterated.
Dividend payments(3) are expected to build prudently and progressively over
time, towards a payout ratio in the range of 30-50% of the Group's adjusted
recurring profitability(4).

 

For further information, please refer to the Investor Update presentation on
the website www.bankofcyprus.com (http://www.bankofcyprus.com) (Group/Investor
Relations).

For further information, please contact Investor Relations at
investors@bankofcyprus.com (mailto:investors@bankofcyprus.com) .

 

 

 

 

Forward Looking Statements

This document contains certain forward-looking statements which can usually be
identified by terms used such as "expect", "should be", "will be" and similar
expressions or variations thereof or their negative variations, but their
absence does not mean that a statement is not forward-looking. Examples of
forward-looking statements include, but are not limited to, statements
relating to the Group's near term, medium term and longer term future capital
requirements and ratios, intentions, beliefs or current expectations and
projections about the Group's future results of operations, financial
condition, expected impairment charges, the level of the Group's assets,
liquidity, performance, prospects, anticipated growth, provisions,
impairments, business strategies and opportunities. By their nature,
forward-looking statements involve risk and uncertainty because they relate to
events, and depend upon circumstances, that will or may occur in the future.
Factors that could cause actual business, strategy and/or results to differ
materially from the plans, objectives, expectations, estimates and intentions
expressed in such forward-looking statements made by the Group include, but
are not limited to: general economic and political conditions in Cyprus and
other European Union (EU) Member States, interest rate and foreign exchange
fluctuations, legislative, fiscal and regulatory developments, information
technology, litigation and other operational risks, adverse market conditions,
the impact of outbreaks, epidemics or pandemics, such as the COVID-19 pandemic
and ongoing challenges and uncertainties posed by the COVID-19 pandemic for
businesses and governments around the world. The Russian invasion of Ukraine
has led to heightened volatility across global markets and to the coordinated
implementation of sanctions on Russia, Russian entities and nationals. The
Russian invasion of Ukraine has caused significant population displacement,
and as the conflict continues, the disruption will likely increase. The scale
of the conflict and the extent of sanctions, as well as the uncertainty as to
how the situation will develop, may have significant adverse effects on the
market and macroeconomic conditions, including in ways that cannot be
anticipated. This creates significantly greater uncertainty about
forward-looking statements. Should any one or more of these or other factors
materialise, or should any underlying assumptions prove to be incorrect, the
actual results or events could differ materially from those currently being
anticipated as reflected in such forward-looking statements. The
forward-looking statements made in this document are only applicable as at the
date of publication of this document. Except as required by any applicable law
or regulation, the Group expressly disclaims any obligation or undertaking to
release publicly any updates or revisions to any forward-looking statement
contained in this document to reflect any change in the Group's expectations
or any change in events, conditions or circumstances on which any statement is
based. Changes in our reporting frameworks and accounting standards, including
the recently announced reporting changes and the implementation of IFRS 17
'Insurance Contracts', which may have a material impact on the way we prepare
our financial statements and (with respect to IFRS 17) may negatively affect
the profitability of Group's insurance business.

 

 

 

1.     Return on Tangible Equity (ROTE) is calculated as Profit after Tax
(annualised) (attributable to the owners of the Company) divided by average
Shareholders' equity minus intangible assets.

2.     Calculated using total operating expenses which comprise staff
costs and other operating expenses. Total operating expenses do not include
the special levy on deposits or other levies/contributions and do not include
any advisory or other restructuring costs.

3.     Any recommendation of a dividend is subject to regulatory approval

4.     The Group's profit after tax before non-recurring items
(attributable to the owners of the Company) taking into account distributions
under other equity instruments such as the annual AT1 coupon.

 

 

 

 

 

 

Group Profile

 

The Bank of Cyprus Group is the leading banking and financial services group
in Cyprus, providing a wide range of financial products and services which
include retail and commercial banking, finance, factoring, investment banking,
brokerage, fund management, private banking, life and general insurance. At 31
March 2023, the Bank of Cyprus Group operated through a total of 64 branches
in Cyprus, of which 4 operated as cash offices. The Bank of Cyprus Group
employed 2,883 staff worldwide. At 31 March 2023, the Group's Total Assets
amounted to €25.4 bn and Total Equity was €2.1 bn. The Bank of Cyprus
Group comprises Bank of Cyprus Holdings Public Limited Company, its subsidiary
Bank of Cyprus Public Company Limited and its subsidiaries.

 

 

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